As the amount of existing homes for sale remains historically low and interest rates remain in the 7% range, data from the Mortgage Bankers Association (MBA) show new construction is picking up the slack. The MBA Builder Application Survey (BAS) for August 2023 shows mortgage applications for new home purchases increased 20.6% compared from a year ago. Compared to July 2023, applications increased by 4%. This change does not include any adjustment for typical seasonal patterns.
“There was strong purchase demand in August for newly constructed homes, as existing for-sale inventory remains low with most homeowners locked into lower mortgage rates and unwilling to give those rates up in this higher rate market,” says Joel Kan, MBA vice president and deputy chief economist.
Adds Kan, “The FHA share of applications dipped slightly in August but remains close to survey highs, indicating that a larger share of first-time homebuyers is supporting the new home sales market. Our estimate of new home sales showed a 4% increase to the strongest pace of sales in three months at 702,000 units.”
MBA estimates new single-family home sales, which has consistently been a leading indicator of the U.S. Census Bureau’s New Residential Sales report, were running at a seasonally adjusted annual rate of 702,000 units in August 2023. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.
The seasonally adjusted estimate for August is an increase of 3.7% from the July pace of 677,000 units. On an unadjusted basis, MBA estimates that there were 59,000 new home sales in August 2023, an increase of 5.4% from 56,000 new home sales in July.
By product type, conventional loans composed 65.8% of loan applications, FHA loans composed 23.8%, RHS/USDA loans composed 0.2% and VA loans composed 10.2 %. The average loan size for new homes increased from $397,148 in July to $398,092 in August.